Global Sustainable Funds Attracted US$37 Billion of Net New Money in Q4 of 2022

European investors showed a continued appetite for ESG products despite headwinds, while sustainable funds in the U.S., Asia ex-Japan ex-China, and Japan, recorded net outflows during the fourth quarter of 2022, according to Morningstar’s latest global sustainable fund flows report.

Global sustainable fund assets recovered to hit US$2.5 trillion at the end of December, from US$2.24 trillion three months earlier. This 11.6% surge put an end to three-quarters of asset decline and was almost double the growth of the broader global fund market.

Hortense Bioy, Morningstar’s Global Director of Sustainability Research, remarked: “Global sustainable fund flows proved resilient again relative to the broader market, which experienced US$ 200 billion of net withdrawals over the fourth quarter.”

Excluding China, the Asia ex-Japan region recorded net outflows of roughly US$22 million over the fourth quarter, which were mainly from sustainable funds in Hong Kong (US$314 million outflows) and South Korea (US$349 million outflows).

By contrast, Thailand experienced inflows of US$11 million, while Taiwan continued to lead the region with US$564 million in net inflows. Singapore recorded the second-highest inflows at US$110 million.

Product development slowed from an exceptional third quarter, with 17 launches in the fourth quarter versus 34 in the previous three months. Of the 17 new launches, 11 were in China, five in Taiwan, and one in South Korea.

In the fourth quarter of 2022, the Japanese sustainable fund market recorded net outflows for the second consecutive quarter. Net outflows amounted to US$557 million. In Japan, newly launched funds tend to drive inflows, but within two years, investors take their money out. Sustainable funds were no exception to this trend.

Four new sustainable funds came to the Japanese market in the fourth-quarter 2022, a decrease compared with six new funds in the previous quarter.

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